Global Advisors Can Offer Expert Insights On Nearshoring Strategy

One of the lessons learned during the pandemic was that the U.S. had fallen into excessive reliance on supply chains based in East Asia, particularly China. This realization drew attention to the need to relocate the sources of production and supply-chain components closer to home. Thus, nearshoring emerged as a trend that continues to boost the flow of capital into Mexico and Latin American countries, as many recent indicators demonstrate. Nearshoring is the practice of transferring a manufacturing operation to a lower-cost market in a nearby country—as opposed to the longstanding practice of offshoring, where manufacturing jobs were sent halfway across the globe. Nearshoring has led to expansion of property plant and equipment in Mexico, Central and South America, driving a surge in equipment demand.

Bloomberg reported in June that foreign direct investment (FDI) in Mexico rose 48% in the first quarter of 2023 over the previous year, to $18.6 billion. FDI in Latin America and the Caribbean is also reaching unprecedented levels. In July, the Economic Commission for Latin America and the Caribbean (ECLAC) reported that in 2022, this region received more than $224 billion in FDI—a 55% increase over 2021 levels, and the highest investment value on record for the region.

Nearshoring guidance informed by decades of experience

The Alta Group has the resources to help any manufacturing or service business whose leadership considers taking advantage of nearshoring to plot a course that will maximize free cash flow by tapping into the Latin American leasing industry to take care of their capital investments.

Over the last three decades, The Alta Group has played a leading role for the equipment leasing and financing industry in Latin America. Our network of advisors has helped global equipment manufacturers, global and domestic banks, and independent lessors to seize the opportunities of the equipment financing markets, while applying best practices in building value in the equipment financing industry, encompassing continuous and sustainable growth, sound and pragmatic risk management and equipment lifecycle management, along with digital transformation and adoption of best practices.

For more than 20 years, The Alta Group has tracked the evolution of the largest equipment leasing companies in Latin America, resulting in the  Alta LAR 100 report, which is presented annually at the Latin American Leasing Conference (This year’s event takes place Nov. 8-10 in Miami.). The Alta LAR 100 ranks the most prominent equipment leasing companies in Latin America.

A cultural bridge to new markets

Our work tracking the players of the equipment leasing industry in Latin America during more than 20 years through the annual conferences, our continuous involvement with the leaders of the industry as their subject-matter experts and gathering data about the industry has given us deep and extensive knowledge of the industry, practices and culture in this region.  We have been building cultural bridges to help companies understand and thrive in these local markets, manage risk and move swiftly through hurdles that can cost newcomers months of delay if not managed correctly.

The advantages we bring include:

• Gaining knowledge. We help clients gain a deep understanding of the markets they are considering, and the possibilities for capturing value in these areas. We provide market entry analysis and strategic support .
• Finding value in equipment financing. Our advisors can show how equipment financing can add value to a capital project by enabling investors to better manage cashflow. We provide originations support, marketing and sales professional development and we arrange vendor financing programs between vendors and lessors.
• Managing risk. We provide a firm understanding of the environment in these markets—everything from how contracts are established to norms of the workplace—to put new investors on solid footing and help them establish their business plan based on realistic expectations. We provide risk management professional development, assist lessors in setting best practices in credit policies and processes, provide support in delinquency management and collection recoveries.
• Making local connections. Through our extensive contacts and local knowledge, we help connect our clients with the local expertise they need in terms of human resources, along with the workforce they need. We provide talent management resources, selection of staff and professional development across the board.
• Funding. We are permanently connected with the key players and funding sources in these countries, and help our clients get funding in local currency. We help leasing companies to raise funding from financial institutions worldwide and support their negotiation thereof.
• Managing assets. Managing residual setting, tracking exposure to assets values, end-of-lease management, returns, repossession of equipment and other contingencies, and remarketing support.   

In an upcoming article for the Monitor, The Alta Group advisors Rafael Castillo-Triana and Juan Neil Dodds discuss the dynamics behind recent nearshoring trends. They also offer insights into how specific Latin American countries are well-positioned to benefit from some of the investments spurred by recent U.S. policymaking, including the Inflation Reduction Act and the CHIPS Act.